Trump increases tariff pressure, but the dollar market has limited reaction

This week, US President Trump further announced a new round of tariffs on 21 countries, including Japan and South Korea, on the grounds that these countries failed to reach an agreement within the 90-day tariff buffer period. Despite the tightening trade situation, the market's short-term reaction to the US dollar was relatively mild, and the US dollar index remained at a two-week high of around 97.80.

The market remains highly concerned about the economic impact of the new tariffs, but judging from the performance of the US dollar, investors have not yet fully turned to safe-haven US dollar assets, possibly because the impact of tariffs has not yet been fully manifested at the macro level.

According to market research, investors are currently more concerned about whether tariffs will affect domestic inflation and employment in the United States, thereby pushing the Federal Reserve to shift its monetary policy this year.

The Fed minutes tend to be "wait and see", but the expectation of interest rate cuts this year has not been completely denied

Minutes of the Fed's June 17-18 meeting showed that most officials at the meeting believed that it would not be appropriate to cut interest rates in the short term unless it was confirmed that price pressures caused by tariffs were "mild or temporary." However, most officials still believed that a moderate rate cut was possible this year, especially in the context of labor market fatigue.

Focus turns to Waller, Daly and Musalem's speeches, which may affect the short-term direction of the US dollar

Tonight, Christopher Waller, a member of the Federal Reserve Board, Mary Daly, president of the San Francisco Fed, and Alberto Musalem, a governor of the New York Fed, will speak one after another. Waller has previously clearly supported rate cuts, saying in late June: "The Fed should not wait until the labor market collapses before taking action."

If Waller continues his previous stance, it will strengthen market bets on action at the July policy meeting, which may put short-term pressure on the dollar.

The dollar's strongest performance was against the Swiss franc, while its declines against the Australian dollar and New Zealand dollar were most obvious, which may reflect the market's growing concerns about commodity-related economies' retaliation against US tariffs.

A foreign exchange strategist pointed out: "The current trend of the US dollar is more about 'future policy expectations' trading, and the official speech tonight will determine the short-term direction."

Editor's opinion:

Although the US dollar index faces the risk of rising tariffs between the US, China, Japan and South Korea, it still maintains a high sideways trend, indicating that the market has not fully priced in the risks. The key lies in whether the differences within the Fed on interest rate policy can converge, especially whether Waller and other officials can make clear policy signals tonight.

If the "forward-looking easing" argument heats up, the US dollar may fall from its highs, otherwise it will remain strong. Pay attention to the breakthrough of the two technical support and resistance levels of 97.20 and 98.10.